Thursday, April 23, 2009

In today's Indo our Minister for Finance attempts to reply to David McWilliam's opinion piece from yesterday. It's fairly clear that Lenihan doesn't want to hear any criticism, constructive or otherwise of his (mis)handling of the banks:

Informed and reasoned contributions to the debate about all the options available to Government are very welcome. Unfortunately, yesterday's contribution from Mr McWilliams fails on both scores.

He then totally fails to address David's point which is that NAMA and a blanket guarantee of bank liabilities can't co-exist without creating a huge moral hazard - If NAMA makes their previous sins go away and the guarantee gives them the financial credability of Ireland when borrowing money what incentive is there for them to act rationally? Bear in mind that nobody us suggesting that the protection for retail investors be dropped - just that once NAMA is up and running the bank should be on a viable footing and aren't supposed to need government backing.

I think that given the circumstances Mr. McWilliams has been pretty mild. Sooner or later Lenihan's going to have to answer questions like:

Why hasn't the managment of the banks been cleared out?

Why did the government voluntarily take non-voting preference equity which leaves them with *no authority* at the boardroom table?

How will NAMA value assets?

Why did he hack at the income of the middle class instead of confronting the unsustainable costs of the public sector?

Why isn't the government forcing the ESB and Bord Gais to reduce prices? Doing so would have a bigger practical effect than restoring the Xmas bonus.